Danaos Corp. Q4 FY2024 earnings call

• The world is entering uncharted territory with shipping market predictions unreliable; tariff war and economic slowdown pose risks. • Danaos is highly insulated with 97% coverage for 2025 and 79% for 2026 at healthy rates, and a $3.4 billion chartered backlog. • Chartered 13 out of 15 new buildings for five years and arranged an $850 million facility. • Profitability is consistent; using strong balance sheet to increase dividends, continue share buyback, and seek growth opportunities. • Strategic focus on maintaining financial position, securing long-term contracts, and investing in fuel-efficient container vessels.

The dry bulk market continues to suffer from malaise due to the slow recovery of the Chinese economy. The Capesize segment, where Danaos' fleet is concentrated, has a historically low order book. The container charter market is healthy, though liners are more cautious with forward dates. Adjusted EPS for Q4 2024 was $6.93 per share, or $133.3 million, compared to $6.99 per share or $136 million in Q4 2023. Adjusted EBITDA increased to $189.7 million in Q4 2024 from $172.6 million in Q4 2023.

• 97% coverage for 2025 and 79% for 2026 at healthy rates. • Chartered backlog of $3.4 billion provides income certainty. • Arranged $850 million facility to finance new building container vessels. • Net debt at $291 million, net debt to adjusted EBITDA ratio at 0.4 times. • Continues share repurchase with $168.8 million spent out of $200 million authority.

• Near-term shipping market predictions are inherently unreliable due to tariff war and economic slowdown. • Dry bulk market suffers from ongoing malaise due to slow recovery of Chinese economy. • Delivery of new tonnage starting in 2024 could be a weakness, especially in Panamax and smaller segments.

Q: Obviously, another strong quarter with some real free cash flow generation. Looks like that can pretty much be repeated in 2025. I guess a couple of things. It looks like you are back to being on pace to get into that net cash position again sometime during 2025. I guess, do you agree with that, that you are on pace to get to a net cash position yet again? And then also, do you want to be in a net cash position, or do you prefer to keep more leverage in place?

A: You know, we are looking as usual. We have arranged an $850 million facility, which covers all the financing of our new building program. Of course, we are generating, we are keeping substantial amounts of cash for opportunities. At present, with all our new building program, we do not even, you know, going forward, manage to go to a negative net cash position. So we are still, let's say, in surplus, and this is also one of the reasons that we have continued our and expanded our building program with ships that we believe are going to be required in the market and in line with the other vessels that we have already ordered.

Q: Could you talk a bit about what scheduled off-hire days on the dry bulk side include and how many dry dockings were conducted during the quarter? And secondly, how many dry dockings do you have planned on that side of the fleet throughout 2025?

A: The dry bulk will have, we have decided to put all our dry bulk vessels in dry dock. And presently, apart from one, all the rest have completed their dry docking in the last six months, where we have installed appendages which are extremely efficient. So we even managed, for example, vessels that were right ship E-rated, we moved them up to a C+ rating. So we have done a lot of investment in these ships, and we believe that when the dry bulk market picks up, we are going to enjoy that. We will not have dry dockings of the dry bulk fleet over the next, at least, two to three years.

Q: Dry bulk rates have been quite soft recently, and asset values have declined from the highs. Is there any appetite to potentially add additional vessels going forward? And if so, would you still focus on Capesizes, or would you be willing to add Panamaxes or Ultramaxes as well?

A: No. We are concentrating on Capesizes. Yes, if prices are attractive, we have already said we are going to increase our presence in the sector.

Q: You mentioned near-term forecasts are basically unreliable in this climate. You know, you have ordered the two new ships after a bit of a pause. Just wanted to ask, what gave you confidence to kind of jump back into the new building side of things?

A: Well, first of all, we believe that, you know, the sector needs more fuel-efficient ships, especially in this size bracket. And secondly, you know, we have arranged financing and charter for everything else. So there is very little, let's say, risk, if any, you know, by our investment.

Q: Are you able to give us a snapshot of what the share count looks like today?

A: It's just below 19 million shares. Something like 18.8, 18.9 at this point.